How to trade Euro Yen – Forex Trading Strategy

FUNDAMENTAL POINT OF VIEW ON EURO/YEN :

European Central Bank

No matter how much the European Central Bank’s Governor, Mr Mario Draghi and his team try to talk the Euro down there is nothing they can do to convince market participants to stop buying the Euro. The ECB has a hard job is its hands. They need to taper QE and that process could push the euro even higher. The ECB cannot get a consensus among its members on when they will stop assets buying (QE) or at least reduce from the current €60 billion to €40 billion or even €20 billion a month with yet another extension of 6 to 9 months.

Other Central Banks

While other Central Banks have already started to increase rates arguing that the time of free money is over and the QE programmes and stimulus have done their job, ECB needs to cut its stimulus all together before thinking of any hikes in its rates. So far interest rates have no forecast to be raised by the ECB until QE ends and that is widely agreed by policymakers. No change in the picture of the Euro upwards move in the charts and any change is likely to send the Euro even higher, therefore we have good reason to be Euro buyers for time being.

Bank of Japan

There is nothing to make Kuroda, Bank of Japan’s Governor, and his team happier than seeing the Japanese Yen devaluing against other currencies. This is a Central Bank which has done everything possible to try and keep its currency, the Japanese Yen, at low prices. The fact that the Yen do hold the status of a safe haven currency makes Kuroda’s life very hard as market participants run to buying Yen on any small alarm in the world these days. That in itself has forced Mr Kuroda to introduce in the beginning of 2016 Quantitative and Qualitative Monetary Easing (QQE) and also venture into the world of negative rates.

In its last meeting this month (September 2017), BOJ came out with this statement:

“The Bank will continue with “Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control,” aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner. The Bank will make policy adjustments as appropriate, taking account of developments in economic activity and prices as well as financial conditions, with a view to maintaining the momentum toward achieving the price stability target.”

So far so good for us in our trade idea to Long EUR/JPY. Two central banks totally diverging.

TECHNICAL POINT OF VIEW:

The Euro has started to trend since the beginning of 2017 and since the results of the French Elections when we had a gap on the charts, the currency seems to be unstoppable. From the Daily chart below we can see that trend in action and a beautiful Ascending Trending Line being respected by the pip. We have had a breakout of a small Ascending Tringle and a pullback into value will have Platinum Traders taking a long trade @ 131.80 as a BPC of that triangle but also as another touch of the longer-term trending line.

The Euro Bulls

The Euro Bulls took control of this market and the breakout of 130.00 as a huge round number is a clear confirmation of that. For the Bears to be in charge again, 130.00 has to fail as demand/support first and the confirmation for the Bears would be being able to close below 127.50. Another great opportunity would be to long this pair @ 130.20 at our Platinum Premium Stop Hunt Level.

EUR/JPY TECHNICAL CHART:

HOW TO TRADE THE EUR/JPY:

A) Long the EUR/JPY @ 131.80 or the nearest zone with a 60 pips stop loss and a target of 135.90

B) Long the EUR/JPY @ 130.20 or the nearest zone with a 60 pips stop loss and a target of 135.90

C) Place alerts on the major and minor support areas and match them with the zones and go for 20/20 trades

KEY TECHNICAL LEVELS ON EUR/JPY:

• 50 – Short Term Selling level
• 80 – Long Term Buying Level
• 00 – Short Term Buying Level
• 20 – Long Term Buying Level – Platinum’s Premium Fib level
• 20 – Short Term Buying Level
• 50 – Long Term Buying Level

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Nisha Patel

Live from the Platinum Trading Floor.